Bill Text: IA HF229 | 2019-2020 | 88th General Assembly | Introduced
Bill Title: A bill for an act allowing the formation of certain for-profit corporations as benefit corporations authorized to do business in this state under certain conditions.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2019-02-27 - Subcommittee Meeting: 03/04/2019 12:30PM House Lounge. [HF229 Detail]
Download: Iowa-2019-HF229-Introduced.html
House
File
229
-
Introduced
HOUSE
FILE
229
BY
JACOBY
A
BILL
FOR
An
Act
allowing
the
formation
of
certain
for-profit
1
corporations
as
benefit
corporations
authorized
to
do
2
business
in
this
state
under
certain
conditions.
3
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
4
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DIVISION
I
1
BENEFIT
CORPORATIONS
2
Section
1.
NEW
SECTION
.
490.1801
Definitions.
3
As
used
in
this
division:
4
1.
“Benefit
corporation”
means
a
for-profit
corporation
5
intended
to
operate
in
a
responsible
and
sustainable
manner,
to
6
produce
a
public
benefit
or
benefits
as
set
forth
in
a
public
7
benefit
provision,
and
to
otherwise
operate
in
a
manner
that
8
considers
the
best
interests
of
those
materially
affected
by
9
its
conduct.
10
2.
“Public
benefit”
means
a
positive
effect,
or
reduction
11
of
a
negative
effect,
on
the
environment
or
on
one
or
more
12
communities
or
categories
of
persons
or
entities,
other
than
13
shareholders
in
their
capacity
as
shareholders,
of
an
artistic,
14
charitable,
economic,
educational,
cultural,
literary,
15
religious,
social,
ecological,
or
scientific
nature.
16
3.
“Public
benefit
provision”
means
a
provision
in
the
17
articles
of
incorporation
that
establishes
one
or
more
public
18
benefits
to
be
promoted
by
the
corporation.
19
Sec.
2.
NEW
SECTION
.
490.1802
Name.
20
1.
The
name
of
a
benefit
corporation
shall
contain
the
21
words
“benefit
corporation”,
or
the
abbreviation
“B.C.”,
or
the
22
designation
“BC”,
any
of
which
shall
be
deemed
to
satisfy
the
23
requirements
of
section
490.401,
subsection
1.
24
2.
Notwithstanding
subsection
1,
the
corporate
name
of
a
25
benefit
corporation
that
is
also
a
professional
corporation
26
or
foreign
professional
corporation
under
chapter
496C
shall
27
contain
the
words
“professional
benefit
corporation”
or
the
28
abbreviation
“P.B.C.”
or
“PBC”,
any
of
which
shall
be
deemed
to
29
satisfy
the
requirements
of
section
490.401,
subsection
1.
30
Sec.
3.
NEW
SECTION
.
490.1803
Certain
amendments,
mergers,
31
and
share
exchanges
——
votes
required.
32
1.
Notwithstanding
any
other
provisions
of
this
chapter,
33
a
corporation
that
is
not
a
benefit
corporation
shall
not,
34
without
the
approval
of
at
least
ninety
percent
of
the
voting
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power
of
each
class
and
series
of
the
outstanding
shares
of
the
1
corporation,
in
each
case
whether
voting
or
nonvoting,
do
any
2
of
the
following:
3
a.
Amend
its
articles
of
incorporation
in
accordance
with
4
section
490.1003
to
include
a
public
benefit
provision.
5
b.
Merge
with
or
into
or
enter
into
a
share
exchange
6
with
another
entity
if,
as
a
result
of
such
merger
or
share
7
exchange,
the
shares
in
such
corporation
would
become,
or
be
8
converted
into
or
exchanged
for
the
right
to
receive,
shares
in
9
a
domestic
benefit
corporation,
foreign
benefit
corporation,
10
or
similar
corporation.
11
2.
Notwithstanding
any
other
provisions
of
this
chapter,
a
12
benefit
corporation
shall
not,
without
the
approval
of
at
least
13
two-thirds
of
the
outstanding
shares
entitled
to
vote
thereon,
14
do
any
of
the
following:
15
a.
Amend
or
eliminate
its
public
benefit
provisions
in
16
accordance
with
section
490.1003.
17
b.
Merge
with
or
into
or
agree
to
any
share
exchange
with
18
any
entity,
unless
no
vote
of
shareholders
of
the
corporation
19
would
be
required
pursuant
to
section
490.1104,
subsection
7.
20
c.
Become
an
unincorporated
entity
by
conversion.
21
Sec.
4.
NEW
SECTION
.
490.1804
Stock
certificates.
22
Any
stock
certificate
issued
by
a
benefit
corporation
23
shall
note
conspicuously
that
the
corporation
is
a
benefit
24
corporation.
25
Sec.
5.
NEW
SECTION
.
490.1805
Duties
of
directors.
26
1.
In
managing
or
directing
the
management
of
the
27
business
and
affairs
of
the
benefit
corporation,
directors
28
shall
consider
the
public
benefit
or
benefits
specified
in
29
its
articles
of
incorporation,
the
best
interests
of
those
30
materially
affected
by
the
conduct
of
the
corporation,
and
the
31
pecuniary
interests
of
the
corporation
and
its
shareholders.
32
2.
Directors
of
a
benefit
corporation
shall
not
have
any
33
duty
to
a
person
on
account
of
any
interest
of
such
person
in
34
the
public
benefit
or
public
benefits
specified
in
the
articles
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of
incorporation
or
on
account
of
any
interest
materially
1
affected
by
the
conduct
of
the
corporation
in
such
person’s
2
capacity
as
such
a
beneficiary.
3
3.
Unless
otherwise
provided
in
the
articles
of
4
incorporation,
any
failure
to
consider
the
interests
of
those
5
materially
affected
by
the
conduct
of
the
corporation,
the
6
public
benefit
or
benefits,
or
the
pecuniary
interests
of
the
7
shareholders
shall
not
constitute
an
intentional
infliction
of
8
harm
on
the
corporation
or
the
shareholders
for
the
purposes
of
9
section
490.202,
subsection
2,
paragraph
“d”
,
subparagraph
(1),
10
subparagraph
division
(b),
or
section
490.202,
subsection
2,
11
paragraph
“e”
,
subparagraph
(2).
12
Sec.
6.
NEW
SECTION
.
490.1806
Periodic
statements
and
13
reports.
14
1.
A
benefit
corporation
shall
include
in
every
notice
of
a
15
meeting
of
shareholders
a
statement
to
the
effect
that
it
is
16
a
benefit
corporation.
17
2.
A
benefit
corporation
shall,
no
less
than
biennially,
18
provide
its
shareholders
with
a
report
addressing
the
public
19
benefit
or
benefits
specified
in
the
articles
of
incorporation,
20
and
the
interests
of
those
materially
affected
by
its
conduct.
21
The
report
shall
include
all
of
the
following:
22
a.
The
objectives
the
board
of
directors
has
established
to
23
address
such
public
benefit
or
public
benefits
and
interests.
24
b.
The
standards
the
board
of
directors
has
adopted
to
25
measure
the
corporation’s
progress
in
addressing
such
public
26
benefit
or
public
benefits
and
interests.
27
c.
Factual
information
based
on
those
standards
regarding
28
the
corporation’s
success
in
meeting
the
objectives
for
29
addressing
such
public
benefit
or
public
benefits
and
30
interests.
31
d.
An
assessment
of
the
corporation’s
success
in
meeting
32
the
objectives
and
addressing
such
public
benefit
or
public
33
benefits
and
interests.
34
3.
The
articles
of
incorporation
of
a
benefit
corporation
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may
require
that
the
corporation
do
any
of
the
following:
1
a.
Provide
its
report
more
frequently
than
biennially.
2
b.
Make
the
report
described
in
subsection
2
available
to
3
the
public.
4
c.
Use
a
third-party
standard
in
connection
with
or
5
attain
a
periodic
third-party
certification
addressing
the
6
public
benefit
or
public
benefits
identified
in
the
public
7
benefit
provision
in
the
articles
of
incorporation
or
the
best
8
interests
of
those
materially
affected
by
the
corporation’s
9
conduct.
10
Sec.
7.
NEW
SECTION
.
490.1807
Derivative
suits.
11
1.
In
any
derivative
suit
instituted
by
a
shareholder
of
a
12
benefit
corporation
to
enforce
the
public
benefit
requirements
13
set
forth
in
section
490.1805,
subsection
1,
the
complaint
must
14
state
all
of
the
following:
15
a.
Each
plaintiff
was
a
shareholder
of
the
corporation
at
16
the
time
the
complaint
states
the
directors
failed
to
properly
17
perform
their
obligations,
or
that
such
plaintiff’s
stock
18
thereafter
devolved
upon
such
plaintiff
by
operation
of
law,
19
and
thereafter
remained
a
shareholder
of
the
corporation
until
20
the
lawsuit
was
commenced.
21
b.
At
the
time
the
lawsuit
was
commenced,
the
plaintiff
22
individually
or
the
plaintiffs
collectively
owned
at
least
five
23
percent
of
any
class
of
the
corporation’s
shares.
24
2.
The
complaint
shall
also
allege
with
particularity
the
25
efforts,
if
any,
made
by
the
plaintiff
to
obtain
the
action
the
26
plaintiff
desires
from
the
directors
or
comparable
authority
27
and
the
reasons
for
the
plaintiff’s
failure
to
obtain
the
28
action
or
for
not
making
the
effort.
29
3.
No
such
derivative
suit
may
be
maintained
by
any
30
plaintiff
who
fails
to
continue
as
a
shareholder
during
the
31
pendency
thereof
or
if
the
plaintiff
individually
or
the
32
plaintiffs
collectively
fail
to
continue
to
own
at
least
five
33
percent
of
any
class
of
the
corporation’s
shares.
34
Sec.
8.
NEW
SECTION
.
490.1808
Other
business
corporations
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——
application
and
effect
of
division.
1
The
existence
of
a
provision
in
this
division
shall
not
of
2
itself
create
an
implication
that
a
contrary
or
different
rule
3
of
law
is
applicable
to
a
corporation
that
is
not
a
benefit
4
corporation.
Unless
expressly
stated
otherwise,
this
division
5
shall
not
affect
a
statute
or
rule
of
law
that
is
applicable
to
6
a
corporation
that
is
not
a
benefit
corporation.
7
DIVISION
II
8
CONFORMING
CHANGES
9
Sec.
9.
Section
490.401,
Code
2019,
is
amended
by
adding
the
10
following
new
subsection:
11
NEW
SUBSECTION
.
1A.
Notwithstanding
subsection
1,
12
the
corporate
name
of
a
corporation
that
is
also
a
benefit
13
corporation
under
division
XVIII,
shall
comply
with
section
14
490.1802.
15
Sec.
10.
Section
490.1302,
subsection
1,
Code
2019,
is
16
amended
by
adding
the
following
new
paragraph:
17
NEW
PARAGRAPH
.
g.
Consummation
of
a
transaction
requiring
18
at
least
a
ninety
percent
vote
under
section
490.1803.
19
Sec.
11.
Section
496C.5,
Code
2019,
is
amended
to
read
as
20
follows:
21
496C.5
Corporate
name.
22
1.
The
corporate
name
of
a
professional
corporation,
the
23
corporate
name
of
a
foreign
professional
corporation
or
its
24
name
as
modified
for
use
in
this
state,
and
any
fictitious
name
25
or
trade
name
adopted
by
a
professional
corporation
or
foreign
26
professional
corporation
shall
contain
the
words
“professional
27
corporation”
or
the
abbreviation
“P.
C.”
or
“PC”
,
and
except
28
for
the
addition
of
such
words
or
abbreviation,
shall
be
a
name
29
which
could
lawfully
be
used
by
a
licensed
individual
or
by
a
30
partnership
of
licensed
individuals
in
the
practice
in
this
31
state
of
a
profession
which
the
corporation
is
authorized
to
32
practice.
33
1A.
Notwithstanding
subsection
1,
the
corporate
name
of
a
34
professional
corporation
that
is
also
a
benefit
corporation
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under
chapter
490,
division
XVIII,
shall
comply
with
section
1
490.1802.
2
2.
Each
regulating
board
may
by
rule
or
regulation
3
adopt
additional
requirements
as
to
the
corporate
names
and
4
fictitious
or
trade
names
of
professional
corporations
and
5
foreign
professional
corporations
which
are
authorized
to
6
practice
a
profession
which
is
within
the
jurisdiction
of
the
7
regulating
board.
8
EXPLANATION
9
The
inclusion
of
this
explanation
does
not
constitute
agreement
with
10
the
explanation’s
substance
by
the
members
of
the
general
assembly.
11
GENERAL.
This
bill
amends
the
“Iowa
Business
Corporation
12
Act”
codified
in
Code
chapter
490,
by
creating
new
division
13
XVIII
governing
benefit
corporations.
The
bill
allows
a
14
new
business
for-profit
to
either
incorporate
as
a
benefit
15
corporation
or
as
an
existing
corporation
to
become
a
benefit
16
corporation.
The
purpose
of
a
benefit
corporation
is
to
17
operate
in
a
responsible
and
sustainable
manner,
that
promotes
18
one
or
more
public
benefits,
and
in
a
manner
that
considers
19
the
best
interests
of
persons
materially
affected
by
its
20
conduct
(new
Code
section
490.1801(1)).
A
public
benefit
21
may
be
of
an
artistic,
charitable,
cultural,
economic,
22
educational,
cultural,
literary,
religious,
social,
ecological,
23
or
scientific
nature
(new
Code
section
490.1801(2)).
Both
24
existing
Code
chapter
490
and
the
bill’s
amendments
in
part
25
creating
new
division
XVIII
are
based
on
model
legislation
26
prepared
by
the
American
bar
association.
27
DECLARATION.
In
order
to
be
regarded
as
a
benefit
28
corporation,
the
corporation’s
articles
of
incorporation
29
(articles)
must
include
a
public
benefit
provision
that
30
expressly
describes
the
corporation’s
public
benefit
(new
31
Code
section
490.1801(3)).
Moreover,
the
corporation’s
32
benefit
status
must
be
identified
in
its
corporate
name
(new
33
Code
section
490.1802
and
amended
Code
section
490.401).
34
Consequently,
a
professional
corporation
which
is
a
benefit
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corporation
must
also
identify
itself
as
a
form
of
benefit
1
corporation
(new
Code
section
490.1802
and
amended
Code
section
2
496C.5).
In
addition,
stock
issued
by
the
benefit
corporation
3
must
state
its
benefit
status
(new
Code
section
490.1804),
as
4
must
any
shareholder
meeting
notice
(Code
section
490.1806(1)).
5
CHOICE
TO
FORM
AS
OR
BECOME
A
BENEFIT
ENTITY.
A
new
business
6
may
choose
to
form
as
a
benefit
corporation
at
the
time
of
7
incorporation
by
declaring
so
in
its
articles
of
incorporation
8
filed
with
the
secretary
of
state
(new
Code
section
490.1801(3)
9
and
existing
Code
section
490.202).
An
existing
corporation
10
may
choose
to
become
a
benefit
corporation
by
amending
its
11
filed
articles
(new
Code
section
490.1803(1)
and
existing
12
Code
section
490.1003)).
An
existing
corporation
may
also
13
choose
to
become
a
benefit
corporation
by
combining
through
14
merger
or
share
exchange
with
a
benefit
corporation
or
similar
15
foreign
public
benefit
entity
(new
Code
section
490.1803(1)
16
and
existing
Code
section
490.1104(7)).
In
any
case,
at
17
least
90
percent
of
the
corporation’s
outstanding
voting
and
18
nonvoting
shares
of
each
class
and
series
must
approve
the
19
choice.
Dissenting
shareholders
are
entitled
to
exercise
20
ordinary
appraisal
rights
(amended
Code
section
490.1302(1)).
21
However,
the
approval
of
at
least
two-thirds
(66
2/3
percent)
22
of
a
benefit
corporation’s
outstanding
shares
entitled
to
vote
23
on
the
question
is
required
to
amend
or
eliminate
a
public
24
benefit
provision
from
its
articles,
or
to
merge
with
or
25
agree
to
a
share
exchange
with
a
nonbenefit
entity
(new
Code
26
section
490.1803(2)
and
existing
Code
sections
490.1003
and
27
490.1104(7)).
28
MANAGEMENT.
When
making
a
decision
affecting
the
business
29
affairs
of
a
benefit
corporation,
its
board
of
directors
30
must
balance
three
criteria:
its
public
benefit
provision,
31
the
best
interests
of
persons
materially
affected
by
the
32
benefit
corporation’s
conduct,
and
the
traditional
factor
33
of
its
stockholders’
pecuniary
interests
(new
Code
section
34
490.1805(1)).
A
director
does
not
have
a
duty
to
account
for
a
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business
decision
that
impacts
a
shareholder
as
a
beneficiary
1
of
a
corporation’s
public
benefit
provision
(new
Code
section
2
490.1805(2)).
A
director’s
failure
to
consider
a
factor
3
does
not
constitute
an
intentional
infliction
of
harm
on
the
4
corporation
or
the
shareholders,
unless
otherwise
provided
in
5
the
corporation’s
articles
(new
Code
section
490.1805(3)).
6
However,
at
least
5
percent
of
the
corporation’s
shareholders
7
in
any
class
may
institute
a
derivative
suit
to
enforce
8
compliance
with
the
corporation’s
public
benefit
provision,
in
9
part
by
alleging
that
the
directors
failed
to
properly
perform
10
their
duties
(new
Code
section
490.1807
and
existing
Code
11
chapter
490,
division
VII,
part
D).
12
REPORT.
A
benefit
corporation
must
prepare
and
deliver
13
a
report
to
shareholders
that
addresses
how
its
public
14
benefit
provision
is
being
promoted
and
persons
materially
15
affected
by
the
benefit
corporation’s
conduct
(new
Code
16
section
490.1806(2)).
The
benefit
corporation’s
directors
17
are
responsible
for
the
report’s
preparation.
The
benefit
18
corporation’s
articles
may
require
the
involvement
by
a
19
third
party,
who
may
be
responsible
for
certifying
how
the
20
corporation
addressed
the
public
benefit
or
the
best
interests
21
of
those
materially
affected
by
the
corporation’s
conduct.
22
The
report
is
not
required
to
be
disclosed
to
the
public,
or
23
delivered
more
frequently
than
once
every
two
years,
unless
24
otherwise
specified
in
the
benefit
corporation’s
articles
(new
25
Code
section
490.1806(3)).
26
APPLICATION.
The
special
designation
of
a
corporation
as
a
27
benefit
corporation
does
not
by
itself
create
an
implication
28
that
different
rules
apply
to
nonbenefit
corporations.
A
29
specific
provision
governing
a
benefit
corporation
also
does
30
not
affect
any
other
provision
that
applies
to
a
nonbenefit
31
corporation
unless
otherwise
expressly
stated
(new
Code
section
32
490.1808).
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